Without a doubt, during the process of a divorce, couples find themselves having to make countless emotionally taxing decisions. For this reason, it’s in everybody’s best interest to be able to think logically in order to make sound decisions, and make the divorce process smoother. Some of these decisions regard the payment plan for mortgages that may have been acquired on a joint basis. None of the involved parties would want to leave feeling shortchanged by the proceedings. After a divorce, financial stability will be an important factor, and proper resolution of a joint mortgage would ensure that ex-partners do not quarrel more in the future. Today, the housing market is relatively slow, and the requirements for lending continue to be tighter by the day. These two factors will be an obstacle for any couple that may want to divorce and sell their house.
The following are some of the proceedings of a joint mortgage when a couple decides to divorce:
Many couples’ first instinct would be to sell the house and share the equity. Many believe that this is also the best option since once the equity is split between the two parties, everyone is free to purchase their own house if they wish to. Some couples may have reservations, though, especially if they have shared a lot in the house. For example, complications arise when couples that have been married for a long time may have valuable memories and both have a sentimental attachment to the house. Couples with young children may also find greater difficulty in agreeing to putting their house up for sale and moving, as to not disturb the child’s development.
There are instances where one party wants to keep the house and refinance in their name, making it impossible to put the house up for sale. However, they must have sufficient income in order to be viable for refinancing.Generally speaking, i is not advisable to trust that an ex-partner will make the payments, regardless of their financial stability. In case an ex-partner fails to pay the mortgage loan, the other party will still be considered liable for payments by the mortgage lender.
Unpredictable factors such as the death of an ex-partner imply that he or she will fail to make payment. In this case, you will be liable to pay the mortgage loan on your own. This means that it will be difficult to cover other expenses such as rent and other mortgages you might want to acquire from lenders. This makes transferring of payments a risky move, and ex-partners ought to be very careful.
Quit to Claim?
A sure way to ensure the interest of the house is transferred to one partner is to sign a Quitclaim Deed. This document stipulates that you are relinquishing the rights to the property you share with your ex. As mentioned before, you will still be liable in case your ex-partner fails to pay. Worse, when you sign the Quitclaim deed, you cannot sell or receive a share of the profits in case your ex-partner decides to sell the property. Signing a Quitclaim deed presents unforeseen challenges that could be costly in the long run.
In some cases, selling the house may be a tough undertaking, especially if the mortgage loan exceeds the value of the house. If couples find themselves in such a predicament, they could short sell the property to the mortgage lender who could accept a diminished value of the house and cancel the couple’s debt. The downside of this move is that your credit score will be affected negatively. Furthermore, the IRS considers the cancellation of the debt as income on your side, therefore, taxes could be imposed.
Renting the house is an option that could buy a couple time to temporarily deal with sales issues. After you and your ex-partner acquire more equity on the house, you may decide to sell the house, which is better than a short sale. It goes without mentioning that you will have to share the responsibilities that accompany being a landlord with your ex-partner.
Some couples may believe that they are able to continue living together after they end their marriage, for financial reasons. As rare as they might be, it is possible to do so, especially when both you consider the possibility of saving a considerable amount of money. Obviously, cohabiting after a divorce is not for everyone, especially if the divorce was messy and there is still tension in the air.
When it Just Won’t Work
Since a divorce has a great emotional toll on everybody involved, it is wise to consider consulting a divorce attorney who can advise you on the best ways to deal with your mortgage issues. A lot of the time, it’s hard to make the “right” decision when you’re in the midst of many emotions and it’s often not a bad idea to seek a professional to help you and guide you to a logical decision.
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